By Ben Levisohn

Investors are getting an education today in what happens when a company is able to sell part of its business for more than its market cap. That’s what happened last night, when Career Education (CECO) announced that it had sold its European business to a private equity group for $305 million.

European Pressphoto Agency

Wells Fargo’s Trace Urdan assesses the deal:

In addition to the extra cash on the balance sheet, which in our view considerably strengthens the company’s position, even against our grim view of its potential legal liabilities, the sale signals a boldness of action that we believe has been lacking for the past several years. We now have permission to believe that this level of focus and resolve can be directed toward rationalizing and focusing its U.S.-based operations.

There is much work left to do in our opinion in order to revitalize the U.S. based business, stem the losses among its physical campuses and better differentiate for long-term survival its online brands. But we believe our model is sufficiently conservative and the assets sufficiently healthy that the current stock price understates the value of the shares.

Urdan raised Career Education’s shares to Outperform from Market Perform, and believes the shares are now worth between $5 and $7. Unfortunately for investors, Career Education’s stock has gained 59% to $6.09 this morning, putting it smack dab in the middle of that range.

Career Education wasn’t the only for-profit company with good news today. ITT Educational Services (ESI), which reported earnings yesterday, has gained 3.2% to $40.44 after it was upgraded to Neutral from Underweight at JPMorgan, though analyst Jeffrey Volshteyn and team are far from bullish. They explain why:

Thursday morning, ESI reported its 3Q13 EPS of $0.80 (vs. our/guidance $0.50/$0.45-$0.55). The beat came from better-than-expected enrollments (-7% y/y vs. our -10% est.) and revenues, coupled with strong cost efficiencies. New enrollments (starts) grew 5% y/y, reflecting the second quarter of positive growth after 10 quarters of declines. Continuing enrollment and student persistence declines narrowed, due to the retention initiatives…We still consider the net cost of ESI degrees to be relatively high vs. competition, but the gap has been narrowing, in our view. We commend management for solid execution in the currently challenging environment. We consider ESI’s current valuation to be fair, given the premium pricing model and enrollment uncertainty and upgrade ESI shares from UW to N. We still consider low-tuition schools (e.g., [American Public Education (APEI) and Grand Canyon Education (LOPE)) more attractive in this environment.

The only real downer in the sector today comes from DeVry (DV), which released earnings yesterday after the close. It reported a profit of 22 cents, missing estimates for 23 cents. Morgan Stanley’s Suzanne Stein and Denny Galindo offer their take:

For the first time since July 2010, DVU posted start growth. Scholarships are taking a toll on revenue per student (RPS), down 3.7% y/y, and management noted it will increase the use of these discounts to attract new students. While we do not expect a smooth pattern of start growth, we are more optimistic F14 could end positive, given easy comps in the back half of the year.

They add that “a recovery may be bumpy.” Shares of DeVry have dropped 0.8% to $35.90.

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